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Tuesday, November 13, 2012 | By Great Energy Challenge | Comments Off on No Water, No Gain for Iraq’s Oil Development

Iraq vaulted to second place this year among the largest oil producers in the Organization of Petroleum Exporting Countries (OPEC), and is poised to ramp up its already robust output even further. But the country’s severe water scarcity could be the Achilles’ heel of its oil production.

An October report from the IEA stressed that oil output in Iraq, which is now at about 3 million barrels per day (bpd), would increase to more than 6 million bpd by 2020 and surpass 8 million bpd by 2035, largely driven by developments of super giant southern oil fields, such as Rumaila, Zubair and West Qurna-1.

Iraq’s official figures on expected oil production are far more ambitious than those of the IEA: 6 million bpd by 2015 and 10 million bpd by 2020. Speaking at a conference at the Center for Strategic and International Studies in Washington, D.C. on October 22, IEA’s chief economist, Fatih Birol, stressed that Iraq is poised to become a key player in world oil markets in the next two decades, even with conservative estimates of its oil production.

However, Iraq requires large amounts of water to sustain this growth in oil production; water is injected into oil fields to support reservoir pressure. Baghdad will need to attract significant investments in water pipelines to bring seawater to oil fields, particularly because freshwater supplies are in rapid decline in much of Iraq.

Some observers believe that drinking water is likely to become more valuable than oil for Iraq in the long-term, and a source of a potential conflict in the region. Shortage of fresh water is reaching a critical point for Iraq, primarily because of supply cuts by upstream countries, namely Iran, Turkey and Syria, which share waters of the Tigris and Euphrates rivers. Mismanagement, neglect and pollution of water sources under Saddam Hussein’s rule have also contributed to chronic scarcity, with little improvement since the U.S. invasion in 2003.

Water for oil injection is in highest demand in southern Iraq, where this resource is also the scarcest. One IEA scenario predicts that “Iraq’s net water injection requirements will increase from 1.6 million bpd in 2011 to more than 12 million bpd in 2035.” These estimates are based on oil production and water injection figures of Iraq’s Ministry of Oil and energy operators. Any level of increase in oil output will necessitate a corresponding rise in water injection. According to the IEA, “1.5 barrels of water must be injected to fill the ‘space’ in the reservoir created by the production of 1 barrel of oil.”

Construction of a Common Seawater Supply Facility (CSSF), a giant water-injection project that would treat seawater from the Persian Gulf and send it 100 kilometers inland for oil extraction use, will be key to Iraq’s ability to meet water requirements for oil production. Once built, the CSSF would process up to 15 million bpd of seawater. But the facility is not expected to come online before 2017. Meanwhile, the country needs water injection systems to supply nearly 8 million bpd of water to boost oil production in aging fields the south. The IEA stresses that water that is not received from CSSF would have to come from local aquifers, which would compete directly with the needs for agriculture and consumption.

Given that Iraq flares most of its associated gas from oil production, re-injecting gas to maintain pressure in oil extraction would be an alternative – if not better – solution to water injection. “Associated gas” is raw natural gas released as a by-product of petroleum extraction. World Bank ranks Iraq as one of top five flaring countries in the world, and it burned close to 9 billion cubic meters of associated gas in 2011, with negative impacts on the environment and public health. But after its early experiment with gas injection, Iraq became heavily reliant on water injection to reverse the fall in reservoir pressure.

According to the IEA, production in major oil fields, such as Rumaila and Kirkuk, has significantly increased with water injection, partly because of access to a large natural aquifer that helped boost output. It is unclear whether the water injection practice will change any time soon, particularly given that it is less costly for oil producers to flare the associated gas rather than to invest in infrastructure to capture and re-inject it in oil fields.

Without either injecting natural gas or water to oil fields, Iraq will not be able to meet its projected increase in oil production. These issues, combined with infrastructure bottlenecks, are likely to put a dent on Iraq’s ambitious oil production numbers.